'Great rotation' well underway with £3.4bn in equity fund sales

Equity fund sales outstripped fixed income in the last four months of 2012, the Investment Management Association (IMA) has confirmed.

Signs the ‘great rotation’ is already well underway were bolstered by news equity funds jumped from the fourth most popular asset class in 2011 – well behind fixed income and mixed assets – up to the second most popular in 2012.

While fixed income funds remained ahead of the pack with £5.6 billion in inflows, equity flows outstripped fixed income for each of the last four months of the year to come in at £3.4 billion.

IMA chief executive Daniel Godfrey (pictured) said it was a ‘clear shift’ in investor mindset.

‘Fixed income funds attracted most retail money in 2012, the fifth consecutive year in which fixed income funds outsold equity funds,’ he said.

‘However, there was a clear shift in investor behaviour towards the end of 2012 with equity funds taking more money than fixed income funds every month from September to December.’

Net retail sales for the year as a whole were massively down on 2011, coming in at £13.7 billion for 2012 compared to £18.1 billion the prior year, as cautious investors bumped up cash reserves.

Nevertheless, total funds under management passed the £600 billion mark for the first time, reaching £658 billion and Godfrey described the overall sales figure as ‘healthy’.

‘Net retail sales were a healthy £14 billion in 2012, which helped grow the funds managed by the industry to over £650 billion for the first time.’

Within equities, investors were most attracted to global equity funds which took £4.1 billion.

At the other end of the scale, UK equity funds were the worst performing region in sales terms, suffering outflows of £982 million. This was a sharp reversal from 2011 when UK equities enjoyed net retail sales of £714 million.

The UK All Companies sector also suffered, ending the year as the worst selling IMA sector following a net outflow of £2 billion.

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